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Since this discussion is about classic 16/17' boats, I can say with some experience that if you are mounting or running and older Mercury, such as a 1984-1988 in-line 6 (90 or 115 HP) or 1984-1986 in-line 4 (75 HP), two holes up is the maximum height, and would require a surfacing prop such as a Laser II. Mercurys older than 1984 do not have the BIA bolt pattern, and are difficult to mount very high because of the old thumb screw clamp bracket at the top.

If you are running a 1987 or later Merc 75, 90 or 115, 2-stroke, Optimax or 4-stroke, I would start with three holes up, since these engines have the "taller" mid section. A performance prop is also required. If it is too high for the prop being used, the engines can then be dropped down one hole.

I have also had experience with an older (1979) Evinrude V-4 100 HP engine mounted on a 16' Currituck. The engine was mounted two holes up, because of the shallow transom splashwell, and with a Stiletto prop, this was all the height the boat could accomodate. The boat ran 50 mph with this setup. Evidently, the older V-4's do not have as tall a mid section as the newer E-tec 90's.

One last issue on the smaller 40-60HP Mercs, with either standard gearcase or the BigFoot gear case.
Mercury says that Bigfoots run deeper (meaning more than 20" length) than the conventional gearcase (which is why they are recommended for pontoons), so a regular gearcase engine cannot be mounted as high as the Bigfoot models. With regular gearcase, 2 holes up would be maximum, although I think with such low HP on a 16/17, there is not much to be gained over one hole up. The Big Foot models could be mounted 3 holes up, but once again, not much to be gained over two holes up.

My thought is that with any brand engine under 90 HP, and combinations that run under 40 MPH, there is not much to be gained in performance by any more than one hole up, except for a deeper Big Foot gearcase.